A Local Government’s Guide to Off-Site Renewable PPA Risk Mitigation

Local governments have become instrumental leaders in the clean energy transition. Nearly 200 US cities and counties and eight states have committed to 100% clean energy to date, covering approximately one in three Americans. Large-scale off-site renewable power purchase agreements (PPAs) have been the primary procurement method used to make progress on these goals, and they will likely continue to be a key strategy given their scope, flexibility, and ability to act as a financial hedge.

As with any energy procurement, off-site PPAs also come with risks. The wholesale market nature of off-site PPAs produces intricacies and financial risks that are not present in other renewable energy procurement strategies. For local governments without prior experience operating in wholesale markets, these may be new and unfamiliar.

This report helps local governments understand and mitigate key risks by explaining what they are and the strategies to mitigate them. We describe six specific risks: price, basis, non-energy market, shape, operational, and volume. The report then summarizes nine mitigation strategies for the two primary types of PPAs, virtual PPAs and physical PPAs.